Citations Affected: IC 4-4.
Synopsis: Substitute natural gas contracts. Permits the Indiana finance
authority (authority) to enter into contracts for the purchase and sale of
substitute natural gas (SNG) from coal gasification facilities to
regulated energy utilities for delivery to retail end use customers.
Requires the authority to establish the substitute natural gas account to
provide funding for SNG related business.
Effective: Upon passage.
January 12, 2009, read first time and referred to Committee on Utilities & Technology.
February 12, 2009, amended, reported favorably _ Do Pass.
February 23, 2009, read second time, amended, ordered engrossed.
February 24, 2009, engrossed. Read third time, passed. Yeas 48, nays 0.
A BILL FOR AN ACT to amend the Indiana Code concerning
utilities and transportation and to make an appropriation.
a facility that:
(1) uses a manufacturing process that converts coal into
substitute natural gas; and
(2) not later than June 30, 2009, has applied for a federal loan
guarantee through the United States Department of Energy
Loan Guarantee Program Office, Solicitation Number
DE-FOA-0000008 for the financing of the facility.
Sec. 4. As used in this chapter, "commission" refers to the
Indiana utility regulatory commission created by IC 8-1-1-2.
Sec. 5. As used in this chapter, "energy utility" has the meaning
set forth in IC 8-1-2.5-2.
Sec. 6. As used in this chapter, "management contract" means
a contract that:
(1) is entered into by the authority and a regulated energy
utility; and
(2) provides for:
(A) the delivery, billing, collection, and remittance of
monies received for SNG delivered in the service area of
the regulated energy utility; and
(B) reasonable compensation for services provided by the
regulated energy utility under the terms of the contract.
Sec. 7. As used in this chapter, "purchase contract" means a
contract that:
(1) is entered into by the authority and a producer of SNG for
the sale and purchase of SNG;
(2) has a thirty (30) year term;
(3) provides a guarantee of savings for retail end use
customers; and
(4) contains other terms and conditions determined necessary
by the authority.
Sec. 8. As used in this chapter, "regulated energy utility" means
an energy utility that is subject to IC 8-1-2-42.
Sec. 9. As used in this chapter, "related contract" means a
contract for services that the authority determines are necessary
and appropriate for the delivery of SNG to the city gate point of a
regulated energy utility.
Sec. 10. As used in this chapter, "retail end use customer"
means a customer who acquires energy at retail for the customer's
own consumption:
(1) from a gas utility that must apply to the commission under
IC 8-1-2-42 for approval of gas cost changes; or
(2) under a program approved by the commission through
which the customer purchases gas that would be subject to
price adjustments under IC 8-1-2-42 if the gas were sold by a
gas utility.
Sec. 11. As used in this chapter, "substitute natural gas" or
"SNG" means pipeline quality gas produced by a facility that uses
a gasification process to convert coal into a gas capable of being
used by a utility to supply gas utility service to retail end use
customers in Indiana.
Sec. 12. The general assembly makes the following findings:
(1) The furnishing of reliable supplies of reasonably priced
natural gas for sales to retail customers is essential for the
well being of the people of Indiana. Natural gas prices are
volatile, and energy utilities have been unable to mitigate
completely the effects of the volatility.
(2) Long term contracts for the purchase of SNG between the
authority and SNG producers will enhance the receipt of
federal incentives for the development, construction, and
financing of new coal gasification facilities in Indiana.
(3) The authority's participation in and oversight of the
purchase, sale, and delivery of SNG to retail end use
customers is critical to obtain low cost financing for the
construction of new coal gasification facilities.
(4) Obtaining low cost financing for the construction of new
coal gasification facilities is necessary to allow retail end use
customers to enjoy the benefits of a reliable, reasonably
priced, and long term energy supply.
Sec. 13. The authority may do the following:
(1) Enter into contracts for the purchase, transportation, and
delivery of SNG.
(2) Establish and collect rates and charges for SNG.
(3) Enter into contracts for private professional and technical
assistance concerning SNG contracts.
Sec. 14. (a) The authority, either directly or as an assignee of an
energy utility, may enter into purchase contracts for the purchase
of SNG from coal gasification facilities.
(b) The authority shall submit a final purchase contract to the
commission for approval.
Sec. 15. The authority may enter into management and related
contracts as needed to transport, store, deliver, manage, and bill
and collect for the delivery and sale of SNG to retail end use
customers.
Sec. 16. Notwithstanding any other law, including public
purchasing and competitive bidding requirements, the authority
may procure purchase and related contracts using the processes
and procedures it considers appropriate to obtain a reliable, long
term supply of SNG.
Sec. 17. Before negotiating the terms of, entering into, or
accepting assignment of a contract under this chapter, the
authority shall consult with the consumer counselor of the office of
utility consumer counselor appointed under IC 8-1-1.1-3.
Sec. 18. (a) The authority may take title to SNG under the terms
of the purchase contract to which the authority is a party.
(b) The commission shall allocate on an annual basis SNG
purchased by the authority to the retail end use customers of a
regulated energy utility based on the proportion of the amount of
gas delivered by the regulated energy utility to the total amount of
gas delivered by all regulated energy utilities in the immediately
preceding calendar year.
(c) SNG is considered sold by the authority when the SNG is
delivered to retail end use customers.
(d) The authority has the right to sell SNG to third parties
instead of retail end use customers if the authority determines that
sales to third parties are necessary and appropriate to manage the
delivery of SNG to retail end use customers.
Sec. 19. (a) If the authority sells SNG to retail end use
customers, the authority shall sell the SNG at a price that is
sufficient to permit recovery by the authority of costs related to the
SNG sold to the retail end use customers, including the following:
(1) Costs of purchasing SNG.
(2) Costs of transporting SNG.
(3) Costs of delivering SNG.
(4) Costs incurred by the authority in administering this
chapter.
(5) Costs associated with supplying working capital,
maintaining financial reserves, and allowing for defaults by
retail end use customers.
The mechanism and processes that the authority uses to calculate
the costs must be capable of audit and verification.
(b) The commission shall require a regulated energy utility to
include in the rates collected from retail end use customers that
purchase SNG from the authority the price for SNG sold to the
retail end use customers by the authority.
(c) The commission shall adopt rules under IC 4-22-2 to carry
out the requirements of this section. A rule adopted under this
subsection must require that a bill provided by a regulated energy
utility to a retail end use customer include a line item for costs
associated with the purchase and delivery of SNG.
Sec. 20. (a) A payment for SNG:
(1) to which the authority holds title; and
(2) that is delivered by a regulated energy utility to its retail
end use customers;
is a direct obligation of the retail end use customers to the
authority. The regulated energy utility shall collect the payments
from the retail end use customers as an agent of the authority.
(b) Payments made under subsection (a):
(1) are the property of the authority;
(2) shall be segregated and held in trust for the authority by
the regulated energy utility that collects the payments; and
(3) shall be credited to the account.
Sec. 21. The obligation of the authority to pay for SNG, or for
any services under a contract entered into under this chapter, is
limited to the funds available in the account plus any other amount
recoverable by the authority through a provision included in a
contract under section 19 of this chapter. An obligation under this
section is not supported by the full faith and credit of the state.
Sec. 22. (a) Upon the request of the authority, the commission
shall order a regulated energy utility to enter into a management
contract with the authority to:
(1) distribute and deliver SNG purchased by the authority;
and
(2) provide billing, collection, and other services related to the
purchase, distribution, and delivery of the SNG.
(b) A management contract entered into under subsection (a)
must include a mechanism by which the regulated energy utility is
reimbursed for all costs incurred in performing the management
contract in excess of costs that, as determined by the commission,
the regulated energy utility would otherwise have incurred in the
ordinary course of business.
Sec. 23. Notwithstanding any other law, the authority is not:
(1) considered an energy utility solely by virtue of its
participation in any transaction described in this chapter;
(2) subject to the jurisdiction of the commission except as
provided in this chapter; or
(3) required to obtain the approval of the commission except
as provided in this chapter.
Sec. 24. If the authority enters into a contract under this
chapter, the state covenants and agrees, for the benefit of the
parties to the contract, as well as any entity that provides financing
to a party to the contract, that the state will not take or permit any
action that would:
(1) impair the contract; or
(2) otherwise limit, alter, or impair the ability of the authority
to satisfy its contractual obligations, including the
establishment and collection of the price for SNG from retail
end use customers;
until the contract has been performed in full.
Sec. 25. This chapter does not authorize the authority to take
ownership of the transportation, transmission, generation,
production, or distribution assets of an energy utility.
Sec. 26. This chapter may not be construed to reduce or modify
an energy utility's obligation to provide energy service.
Sec. 27. (a) The authority shall establish and administer a
separate account known as the substitute natural gas account.
(b) The account consists of payments credited to the account
under section 20(b)(3) of this chapter.
(c) The authority shall use the account to provide funding and
pay expenses to satisfy the obligations of this chapter.
Sec. 28. In addition to the rules adopted under section 19(c) of
this chapter, the authority may adopt rules under IC 4-22-2 to
implement this chapter, including a rule to protect confidential or
proprietary financial or trade secret information included in
reports provided to the authority by SNG producers, energy
utilities, or regulated energy utilities.
Sec. 29. The terms of a customer choice program (as defined in
IC 8-1-2-42.1) may not impair the ability of the authority to deliver
and sell SNG to retail end use customers.